China and the great global landgrab

It seemed unbelievable. An area of Madagascar half the size of Belgium, and equal to half the country’s cultivable land, would be leased for 99 years to a South Korean company to farm maize and palm oil. And the company, Daewoo Logistics, said it expected to pay nothing for the concession. Madagascar would get nothing from the deal except some employment - and according to earlier reports, not much of that, with labour being imported from South Africa.

Sure enough, the backtracking started straight away. Madagascar denied reaching any agreement with the Korean firm. "The contract which we signed in July with Daewoo Logistics concerns only the facilitation of a land search. We were to help them look for land," a Madagascar official said. And the talks concerned only 100,000 hectares, not the 1.5 million originally reported.

But the reports - and the denials - fit into a growing pattern of a global grab for agricultural land. In a process accelerating since March this year, Saudi Arabia, Japan, India, Korea, Libya and Egypt, as well as China, have all been among the countries reported to be snapping up farmland, both to secure their own food supplies and to cash in on rising food prices, which make agricultural land appear a secure investment in a time of global economic turmoil.

Earlier this month the Gulf state of Qatarwas reported to have asked Kenya to lease it 40,000 hectares of land to grow crops as part of a package which would include in return funding for a new £2.4bn port on the tourist island of Lamu.

A leading official from the neighbouring state of Bahrain has set out an ambitious programme, seeing Africa as the future breadbasket for the entire Gulf region. "Food price inflation constitutes a major strategic challenge for the GCC countries as they have rapidly growing populations, but a declining agriculture due to lack of water and arable land," Bahrain Export Development Society chairman Dr Yousef Mashall told a forum on Gulf-African co-operation earlier this month. "

"Countries such as Sudan, South Africa, Mozambique, Senegal and Tanzania are rich in water and land," said Dr Mashal.

"A lot of joint ventures can be investigated in agriculture and Bahrain investors can look at buying land and farming it, producing goods, canning or freezing them and importing to Bahrain.

And at the same time as the Madagascar deal was hitting the headlines, China was involved in a similar-seeming deal in the Philipines. A Chinese company was reported to have been given a lease on some million acres of agricultural land under what were criticised as ‘vague terms’. The area covered by the deal was said to represent about a tenth of all Philippine agricultural land.

Concerns were raised about the terms of the deal, about the effect on local food security, and on the potential conflict with the country’s constitution. But here, as in Madagascar, officials were swift to play down the implications. There was no agreement, they said, only an outline ‘memorandum of understanding’ with the details to be negotiated later. And Philippine senators have since been told that the deal has been delayed “for deeper consultation with all possible stakeholders to come up with an acceptable mechanism.”

Small wonder then that Jacques Diouf, director -general of the Food and Agricultural Organisation [FAO"> has warned that ‘The race by food importing countries to secure farmland overseas to improve their food security risks creating a neo-colonial system’.

But how far does this analysis fit China's involvement in African farming? Certainly the incentive is there for an overseas land grab to secure future food supply. With some 20% of the world’s population, China has only 7 per cent of its arable land.

And that is already being whittled down by erosion and environmental degradation, according to a recent survey.

‘Almost 100 million people in south-west China will lose the land they live on within 35 years if soil erosion continues at its current rate, a nationwide survey has found.

Crops and water supplies are suffering serious damage as earth is washed and blown away across a third of the country, according to the largest-scale study for 60 years.

Harvests in the north-east, known as China's breadbasket, will fall 40% within half a century on current trends, even as the 1.3 billion population continues to grow.

While experts cited farming and forestry as the main causes, contributing to over a third of the area affected, the research team said erosion was damaging industrial areas and cities as well as remote rural land. About 4.5bn tonnes of soil are scoured away each year, at an estimated cost of 200bn yuan (£20bn) in this decade alone’ [The Guardian">.

At the same time China’s rapid economic development is increasing the strain on the available land. According to the recent comprehensive report on China’s overseas farming policy from the Brussels Institute for Contemporary Chinese Studies [BICCS"> China now accounts for 22 per cent of worldwide rubber consumption, and its demand for cotton tripled between 1998 and 2007. In 2008 only 7 million tons of that demand is expected to be met from domestic production with 27.5m tons imported - an estimated 45% of it from Africa.

The higher incomes of China’s citizens also leads to a more varied diet, with higher meat consumption. In 2007 China’s citizens consumed five kilos more pork per head and two kilos more vegetable oil than in 1998. China’s import demand for agricultural products has been projected to grow at double-digit rates for the next 25 years. True, at present Africa only accounts for four per cent of China’s agricultural imports. But as the BICCS report points out ‘Even a relatively small change in China’s food consumption pattern may have a major influence on the global agricultural commodities market’ - and all the more so therefore on individual African countries.

So it is not surprising that China’s overseas agricultural deals are seen in this context, which is clearly also that in which many Chinese policymakers also see them. Thus a recent survey of the global trend for ‘landgrabbing’ to secure food supplies [‘Seized! The 2008 land grab for food and financial security’"> concludes that;

‘As many farmers’ leaders and activists in south-east Asia know, Beijing has been gradually outsourcing part of its food production since well before the global food crisis broke out in 2007. Through China’s new geopolitical diplomacy, and the government’s aggressive “Go Abroad” outward investment strategy, some 30 agricultural cooperation deals have been sealed in recent years to give Chinese firms access to “friendly country” farmland in exchange for Chinese technologies, training and infrastructure development funds. This is happening not only in Asia but all over Africa as well...with Chinese companies leasing or buying up land, setting up large farms,flying in farmers, scientists and extension workers, and getting down to the work of crop production’.

However some exaggeration inevitably creeps in when these general strategic pressures and trends are translated directly into the analysis of specific Chinese interventions. Thus the ‘Grain’ report also claims, citing a Liberian press report, that:

‘The Chinese government recently announced a commitment of US$5bn for Chinese corporations to invest in African agriculture over the next 50 years through the new China–Africa Development Fund.’

But in fact US$5bn is the figure for the ultimate intended size of the entire fund, not to be reached for several years and according to a Xinhua report, most of it will not be invested in natural resources.

Indeed, according to the BICCS report, agriculture accounted for only 0.9% of China’s total outward investment in 2006.

So instead of translating China’s mounting agricultural constraints directly into an interpretation of trade and investment deals with specific countries, it might be better to look at what specific empirical work has been done on the nature and role of existing Chinese farm investments and their role and impact on the local economy.

Two researchers engaged in doing just that gave presentations to a recent conference in London on the contribution of China’s commodities trade to economic development in Africa. James Keeley of the International Institute for Environment and Development [IED"> has been studying the growing number of Chinese farms in Zambia. Now totalling 23, representing a total investment of $10m, he finds that to date they are all providing for the local food market, not for export - for example, they currently provide 15% of all Lusaka’s eggs.

He finds the Chinese farms appear poorly connected into any wider strategy and have a positive local role as agricultural demonstration centres, able to disseminate the experiences gained by China’s own network of over 100 agricultural academies and research institutes, with a useful ability to do low-cost research geared to poor farmers.

According to Keeley "The argument that China is setting up farms to feed itself does not hold water. A lot of the evidence is a bit scant and there is no rapid land grab going on".

A similar conclusion is drawn by Yahia Mahmud of Sweden’s Lund University, on the basis of his research into long-established Chinese-owned farms in West Africa, particularly the M’Pourie farm in southern Mauritania. He also finds no sign of a ‘breadbasket’ approach, and the older Chinese machines used on the farms - models no longer made in China - are preferred by local people to more modern French machines.

However, it could be argued that both of these examples concern farms established some time ago in an earlier phase of China’s African engagement. China’s more recent involvement in the rich Zambezi valley area of Mozambique might be a better pointer to the future - though it could still be seen as being potentially as much of a ‘win-win’ engagement as a ‘neo-colonial land-grab’.

In 2006 China’s Eximbank granted $2bn in soft loans to the Mozambique government to build a mega-dam on the Zambezi river in Tete province. According to Loro Horta ‘In addition to the Mpanda Nkua dam, China has offered to finance three other dams along the Zambezi and two more along the Limpopo river, while also building new roads and modernizing the Guelimane and Nacala harbors in Zambezia and Nampula provinces respectively. This investment in infrastructure is clearly designed to maximize production and facilitate the rapid export of foodstuffs to China while also giving lucrative contracts to Chinese companies’.

Early this year China also pledged to invest $800m in modernising Mozambique’s agriculture, with the aim of increasing rice production over the next five years from 100,000 to 500,000 tons. China is also reported to be funding an Advanced Crop Research Institute and other smaller agricultural schools, and over 100 Chinese agricutlrual specialists are said to be working in the country, on projects including numerous irrigation and canal networks in the Zambezi valley.

As Horta points out, ‘Mozambique’s increased rice production is clearly destined for export to the Chinese market, since the staple accounts for just a tiny fraction of the Mozambican diet and is primarily consumed in the big cities by the wealthy. Over 90 percent of the country’s population relies on mandioca (cassava) and shima (cassava flower), maize, and peanuts for its diet’.

China is also said to be linking further work on these and other crucial infrastructure investments to Mozambique conceding satisfactory terms on land leases for Chinese rice farms. But there has been a Chinese climb-down on the reported initial intention to settle large numbers of Chinese in Zambezia and Tete provinces to run mega-farms and cattle ranches.

According to Horta; ‘A memorandum of understanding was reported to have been signed in June 2007, allowing an initial 3,000 Chinese settlers to move to Zambezia and Tete provinces to run farms along the valley. A Mozambican official said the number could eventually grow to up to 10,000. However, the reports of this deal caused such an uproar that the Mozambique government was forced to dismiss the whole story as false’.

Current plans by contrast appear to envisage Chinese managers and technicians with local labour, and ownership by joint ventures with Mozambican participation. But this leaves unsettled the question of land rights and the position of existing cultivators.

As Horta concludes;

‘While the Zambezi valley may offer China productive farmland and other opportunities, Beijing must be sensitive to local concerns lest its dreams for the valley turn into a public relations debacle that would damage China’s image on the continent. ...Instead of trying to induce officials in Maputo to allow them entry into the valley, China would be better advised to listen to and negotiate with the people actually living there, since it is their land that China is banking on for its future food security.

If implemented with sensitivity, China’s agricultural plans could bring tremendous benefits for both sides...Through the centuries of Portuguese rule the fierce peoples of the valley showed that they don’t take it kindly being pushed off their land – something both Beijing and Maputo should keep in mind’.

The apparent shift in China’s Mozambique policy reflects a broader debate within China’s agriculture ministry and top leadership which came to a head earlier this year. China’s Ministry of Agriculture [MOA"> was reported to be about to adopt a draft policy making support for offshore land acquisition by Chinese agricultural companies a central state policy, in order to guarantee food security. [‘China eyes overseas land in food push’ Financial Times May 8 2008">

But despite lobbying for the policy by private firms senior officials opposed the plan which was officially disowned. According to Xue Guoli, a senior official in the MOA’s agricultural trade promotion centre;

"It is not realistic to grow grains overseas, particularly in Africa or South America. There are so many people starving in Africa, can you ship the grains back to China? The cost will be very high as well as the risk."

Apart from shipping costs, officials were reported to be concerned about sensitivities in most countries to foreigners owning land, and consequent vulnerability to nationalisation and labour disputes - all of which, they argued, meant that it might be both cheaper and more secure to source China’s future import needs on the world market.

Nonetheless the debate continues. The Economic Observer reported in July that the MOA was still drafting policies to encourage overseas land purchase. But the critics were continuing to put their case:

‘"Given high freight costs, food produced overseas would not necessarily be sold back to China. Whether it will help improve domestic food reserve is still a question," said Gu Yingchun, research fellow of Zhejiang Academy of Social Sciences.

China Agricultural University principal He Bingsheng voiced his concern: "Many countries would limit exports once food price rises. For example, Argentina levies a 44% tax on soy bean exports, and some others even ban soy bean exports."

Scholar Hou Shuyi believed China should first improve its own land use and take full advantage of it before spending massive capital on buying land abroad’.

All of which should serve as yet another warning against the easy view of China as a monolith, overlooking both the continuous policy debates within the Chinese leadership and policy community; and also the considerable independence of Chinese firms - state owned as well as private - in pursuing their own economic interests.

Regardless of China’s governmental policy on food security, agricultural land will continue to be an increasingly attractive investment, and Chinese firms are likely to continue to want to have a slice of the action, along with all the other investors and operators in the global market place. And they will continue to be able to count on sympathetic elements among policy-makers by playing the ‘food security’ card.

The BICCS report quotes from the official guidelines on outward investment, which specifically list as sectors in which investment will receive government support ‘those that can obtain resources or raw materials that are lacking within China and which the development of the national economy urgently requires’.

These would include agricultural projects. But it appears that to date the main project to be supported by the China-Africa Development Fund is the establishment of ten demonstration farms in Africa.

Agricultural investment to ensure China’s security of supply, as well as the commercial interests of the firms involved, is certainly under way in the Philipines, Brazil, and in China’s neighbours such as Laos and Burma. But even there, and especially in Africa, there is still a policy debate with those well aware of the reputational risks of too overbearing an approach.

It should be in the interests of Africa’s farmers as well as campaigners concerned with issues of food sovereignty and sustainability, to make common cause with China’s more far-sighted policymakers. The aim must be to ensure that China’s agricultural involvement in Africa takes place within a policy framework that maximises a long-termist ‘win-win’ approach including technology transfer, infrastructure investment, and increased food security and sustainability for both parties.

For details of the Foreign Policy Centre/Open University Conference ‘Going for Growth: Can Commodities Transform Development in Africa and China?’ are available on the Centre website.

The BICCS report ‘China’s foreign farming policy’ by Duncan Freeman, Jonathan Holslag and Steffi Weil is available for download.

∗ Stephen Marks is a research associate with Fahamu’s China in Africa programme.

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